DOD officials cautiously tout progress in financial management reform

By Amber Corrin

Sep 17, 2012

When Defense Secretary Leon Panetta last year accelerated the timeline for the Defense Department to achieve financial auditability, promising to deliver audit readiness by 2014 instead of 2017, many wondered how such a colossal overhaul would happen. Now, DOD officials say ongoing efforts are yielding improvements that are encouraging.

The department’s business management struggles go back decades, and it’s been an uphill battle to institute new systems and enterprise resource planning (ERP) programs. Old legacy systems are simultaneously relied upon and being replaced, training to use the various programs has remained a top challenge and persistent budget uncertainties weigh down planning and execution.

While those issues all still present formidable hurdles, top DOD leaders are cautiously confident.

“I'll regret this, but I think we're at midfield,” said DOD Comptroller Robert Hale. “But we've got momentum on our side, we've got the ball and we're on the offense.”

Hale pointed to both the department’s endemic problems with keeping financial records and ongoing budget battles as key factors that hinder advancement.

“The problem is the lack of our ability to document the transactions. The way we do financial management at DOD, some of these transactions…go back 10 years or more,” Hale said. “We've encountered unprecedented budgetary uncertainty in recent years…now we face the prospect of sequestration and yet another long-term continuing resolution. Dealing with these extraordinary actions is sapping the time we could be spending on other things including audit readiness.”

One of the biggest priorities is standardizing business and accounting processes, including through the institution of ERPs – many of which have troubled histories, and all of which require both the use and eventual shutdown of legacy IT systems.

“We’re taking a standards-based approach," said Elizabeth McGrath, DOD deputy chief management officer. McGrath noted that for now, legacy systems remain in key business management functions but are on their way out. “Although a nice new system sounds a lot easier than a legacy system, really there are a lot more internal controls and complexities…I think the difference today, though, is that we truly are taking an enterprise perspective.”

Case study: GFEBS

One of DOD’s highest-profile ERPs is the Army’s General Fund Enterprise Business System (GFEBS). With more than 53,000 users, the system was fully fielded across the Army as of July and is currently undergoing a second phase of assessments known as Exam 2.

“We’re optimistic that this exam will be positive; I imagine there will be things we need to continue to work on as we prepare for 2014,” Kristyn Jones, GFEBS director of financial information management, said in an interview with FCW. “We’re on a good path to meet the goals. The Army is the only one of the services that has deployed their new financial system across the entire service, so that’s a big step for us.”

Like other ERPs and financial management reform as a whole, training has been a familiar issue, Jones said, as well as the sheer scope of the effort.

“GFEBS is a major acquisition program, which means [we get] new equipment training – ‘how do I use my calculator?’ basically. Now what we’re reinforcing is, ‘How do I do calculus?’ It’s more on the competencies than how to use the tool,” Jones said, adding that the magnitude has also been daunting. “The Army runs hospitals, schools, research labs, the active guard and Reserves – and at the same time getting formations ready to go to war. All those organizations are so different, so trying to have one standard system at the same time was a huge challenge.”

Taking an incremental approach to developing and rolling out GFEBS – much like how the military has been incrementally fielding new technologies – has helped with the process, as has collaborating with the other services, sharing best practices.

“We’ve used a crawl-walk-run approach. That’s how the Army trains…and we use that as the way to get the various commands throughout the world comfortable with the system. It’s made each follow-on wave easier,” she said. “We also engage with other offices a lot. It’s been useful, as the services are rolling out their [separate] systems, to talk to each other, sharing lessons learned and capabilities.”

GFEBS has been subject to scrutiny over the years, including a number of GAO and DOD Inspector General reports. Jones acknowledged that there have been bumps along the way that the Army has corrected – and she’s confident that it's not just another doomed ERP.

“GFEBS has the best record in DOD, to my knowledge, in terms of being on-cost and on-schedule among all the ERPs,” she said. “It’s fully deployed, and it’s supporting the Army going to auditability. It’s already met its key performance parameters and all of its milestones. I think there have been concerns that the size of a program like GFEBS might be too overwhelming, but I think because of the commitment of the Army to get this done…we’ve been able to successfully implement.”